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1970 Supreme(AP) 178

Andhra Pradesh High Court
Judges : S.OBUL REDDY, VENKATESWARA RAO
Reddi Veerraju - Appellant
Versus
Chittori Lakshminarasamma - Respondent
Decided On : 08-04-70

A partner cannot transfer partnership property, but only his interest in the partnership business.

Headnote:

PARTNERSHIP - MORTGAGE - INTEREST IN PARTNERSHIP BUSINESS - TRANSFER OF PARTNERSHIP PROPERTY - VALIDITY - LIMITATION - PARTNERSHIP ACT, 1932, SECTION 29.

Fact of the Case:

Plaintiff instituted two suits for recovery of money on the foot of two mortgage deeds executed by the 1st defendant, a partner in a rice mill. The 2nd defendant in one suit was a subsequent purchaser of a share of the 1st defendant in the mill property at a court sale. The contesting defendants pleaded that the mortgage was not valid as it was a share of the partnership properties and that the suit was barred by limitation.

Finding of the Court:

The court held that the mortgage was not valid as it was a transfer of partnership property, which is not permissible under the Partnership Act. The court also held that the suit was barred by limitation as it was not brought within the prescribed period of six years.

Issues: 1. Whether the mortgage of partnership property was valid. 2. Whether the suit was barred by limitation.

Ratio Decidendi: 1. Under Section 29 of the Partnership Act, a partner can only transfer his interest in the partnership business, not the partnership property. 2. The mortgage in this case was not a transfer of the mortgagors' interest in the partnership business, but of certain items of the partnership property. Therefore, the mortgage was not valid. 3. The suit was barred by limitation as it was not brought within the prescribed period of six years.

Final Decision: The appeals were allowed and the decrees of the trial court were set aside.

OBUL REDDI, J.

( 1 ) APPEAL No. 28 of 1967 arises out of the Judgment in O. S. 53 of 1964 on the file of the Subordinate Judge, Rajahmundry passing a preliminary decree in favour of the plaintiff in terms thereof. Appeal No. 381 of 1967 and the un-numbered appeal (SR1448/67) are directed against the decision in O. S. No. 54 of 1964 passing a preliminary decree. 2nd defendant in O. S. No. 53 of 1964 preferred appeal No. 28 of 1976; defendants 2 and 3 in O. S. No. 54 of 1964 and the 6th defendant the very same suit preferred appeal NO. 381/67 and the un-numbered appeal respectively.

( 2 ) THE plaintiff instituted O. S. No. 53 of 1964 for recovery of Rupees 14,000/- on the foot of Ex. A-2 dated 4-1-1952, a registered mortgage deed executed by the 1st defendant; and O. S. No. 54 of 1964 for recovery of a similar amount of Rs. 14,000. 00 on the foot of Ex. A-1 mortgage executed on the same date i. e. , 4-1-1952 by the 1st defendant for himself and on behalf of his minor sons, defendants 2 and 3. Though the defendants are different in each of the two suits, the plaintiff (1st respondent in these appeals) is common to both the suits. As the defenses raised by the contesting defendants in each of the two suits were substantially the same, the two suits were tried together with the consent of parties and the evidence recorded in O. S. No. 54 of 1964 was treated as evidence in both the suits.

( 3 ) THE case of the plaintiff as narrated by her, in O. S. No. 53 of 1964 is that the 1st defendant, in partnership with others as partners, established a rice mill called "veera Venkata Satyanarayana Rice Mill" at Someswaran. For the purpose of the partnership business, he borrowed moneys from the plaintiffs husband and executed promissory notes on 5-6-1950. He also borrowed moneys from the second son of the plaintiff under another promissory note dated 16-5-1950. As the 1st defendant was unable to discharge the debts due under the promissory note, he borrowed Rs. 12,658. 00 from plaintiff and executed the mortgage bond (Ex. A-2) dated 4-1-952 hypothecating the properties shown in the schedule thereto. The 1st defendant in O. S. No. 54 of 1964, who is also a partner of the firm, borrowed Rs. 9,242. 00 and executed Ex. A-I on behalf of himself and on behalf of his two minor sons defendants 2 and 3. The 2nd defendant in O. S. No. 53 of 1964 is the subsequent purchaser of item (1) of the plaint schedule properties at a court sale held by the Receiver in O. S. No. 56 of 1957 on the file of the Sub-court Rajahmundry, It is the plaintiffs case that the sale was subject to the mortgage and therefore she is entitled to proceed against the share of the 1st defendant in item (1) of the plaint schedule properties; or, in the alternative to proceed against the 1st defendants share of the sale proceeds which have been deposited into Court to the credit of O. S. NO. 56 of 1957.

( 4 ) THE 2nd defendant in O. S. 53 of 1964 is the 6th defendant in O. S. No. 54 o 1964. The defences put forward by the contesting defendants in both the suits are identical. The 1st defendant in O. S. No. 53 of 1964, remained ex parte. The 2nd defendant pleaded ignorance of the mortgage (Ex. A-2) in favour of the plaintiff. According to him, he purchased the share of the 1st defendant on 16-11-1954 in an execution sale in O. S. No. 134 of 1951 on the file of the Sub-Court, Kakinada. The firm of which the 1st defendant in O. S. No. 53 of 1964 and the 1st defendant in O. S. 54/64 and others were partners, stood dissolved on 31-8-1954 and one of the partners filed O. S. No. 56 of 1957 for settlement of accounts which was decreed on 9. 4. 1960. In the final decree proceedings the mill was sold on 24-4-1962 and the 2nd defendant in O. S. No. 53 of 1954 was the purchaser in that auction. It is the case that the sale was no subject to the mortgage; and as such, the mortgage is not binding on him. It is also his case that even otherwise, the mortgage, being a share of the partnership propert














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